School reform: Out-of-state firms reap millions

Jun. 10, 2012

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The Louisiana Department of Education is spending more than $132.9 million with two out-of-state companies for standardized tests.

The department has 70 current contracts worth more than $1 million each. That adds up to $282 million, more than half of which goes to contractors outside of Louisiana.

The volume of contracts awarded by the DOE doesn't sit well with the state's treasurer, while the flow of funds to out-of-state companies concerns several past and present Board of Elementary and Secondary Education members.

Treasurer John Kennedy says he believes the education department is "right at the top of the list" when it comes to departments that "abuse" contracts.

But long-term efforts at education reform and accountability legislation are the driving forces behind some of the largest contracts between the DOE and at least two out-of-state firms.

The biggest beneficiaries of current contracts are Minnesota-based Data Recognition Corp. for $93.1 million and California-based Pacific Metrics for $39.8 million. The six current contracts for the two companies account for $132.9 million.

The department also has smaller contracts. The smallest of the 269 available consulting contracts are for $250 each.

Kennedy's concerns are with the volume, overall dollar amount and whether or not the purposes for some of the contracts constitute appropriate fiscal priorities for the state.

"I'm all for reforming education," Kennedy said. "Many of the governor's ideas I like, but I think it is a mistake to demonize your teachers, and you do that every time you give a consulting contract to an out-of-state person or company to do something other than to spend money in the classroom."

Louisiana Superintendent of Education John White didn't respond directly to Kennedy's concerns, but answered a reporter's request for response with questions about the meaning of Kennedy's statement.

White said all contracts comply with Louisiana bid law, which requires that contracts over $50,000 be sent out for bid.

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"There are laws set up regarding procurement that ensure that taxpayers are getting the best value for their dollar," he said. "It is no one individual's decision who to enter into a contract with. It is a reflection of the law."

The department says it has reduced

contract expenditures about 15 percent since Gov. Bobby Jindal took office in 2008. Some contracts also represent federal grant money to individual school districts that is sent to the education department to be distributed, White said.

Board of Elementary and Secondary President Penny Dastugue said there is a continuing effort by the Department of Education to reduce expenses.

"The money spent on testing is money that could be spent elsewhere, so there's always the desire to get the best contract you can," she said. "I don't think these contracts are out of line or inappropriate."

Data Recognition's latest contract with the department was awarded through a process called sole source procurement. These contracts can be awarded after a determination by the Office of Contractual Review based on information provided by the DOE stipulating that the company is the only entity that can provide a particular service. White said Data Recognition provides an "extremely sophisticated, national-scale service."

Kennedy examined education contracts for the five years from 2005-10 and found 5,499 contracts costing $615 million. One example he cites of potential waste is a $94,000 contract awarded to a California company to teach children how to play.

"That's money that could be spent in the classrooms," he said. "If you spend any time looking at these contracts, you'll see that most of this money was not spent in the classroom. Although some of it was federal, it's still taxpayer money, and we ought to spend it in the classroom."

Information provided by the National Center for Education Statistics shows in 2007-08 Louisiana spent 4.8 percent of its total education expenditures on non-instructional expenses. The U.S. average for the same period was 3.4 percent.

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In 2009, Jindal appointed a streamlining commission to look at ways to save money. Kennedy, a member of the commission, said the education department wasn't cooperative with its information.

"What information I've gotten, I've had to dig. They stonewall until the cows come home," he said. "There's not enough transparency and not enough disclosure. The Legislature ought to be more curious than they seem to be about how all this money is spent and whether we are getting results for it."

Both Data Recognition and Pacific Metrics have contracts with the DOE through the division of student and school performance that include assessments White said are mandated by law.

"Tests are required by the Louisiana Legislature to be administered by the Department of Education," he said. "Bid laws ensure taxpayers get the best value for their dollar, but it costs money to administer these tests. That's just common sense."

Testing is also required by the federal government to qualify for some grant funding, White said.

Data Recognition has two current consulting contracts with the state for a total of $93 million. One contract for $47 million began in 2003 and ends June 30. According to Scott Norton of the DOE, an extension of this contract is under negotiation. The proposed extension would take the contract through 2015 at a cost of up to $6.5 million each year. Another contract overlapping the first was approved in 2011 for $45 million and extends until June 2015.

The description of the $47 million contract on the Louisiana Transparency and Accountability website says Data Recognition is responsible for developing and implementing norm-referenced tests in English, language arts and mathematics, and criterion-referenced tests in science and social studies for grades third, fourth, fifth, seventh and ninth. State records show Data Recognition has held state contracts with Louisiana since 1998 for a total of at least $236 million. Some of those contracts have expired. On its web site, Data Recognition says has done business with Louisiana since 1985.

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Pacific Metrics has had seven contracts with the Department of Education since 2002 for a total of $45.7 million.

Three of company's four current contracts are for development of web-based tests and one is to provide a web-based tool for local school districts to review and certify data.

According to its website, Pacific Metrics develops online student assessment systems with items aligned to the Common Core State Standards in English, language arts and mathematics.

Data Recognition referred requests for comment to the Department of Education communications office. Pacific Metrics did not return calls.

Eight of the state's contracts worth more than $1 million are for consulting, but the total cost for those eight contracts — $136.7 million — represents 49 percent of the total dollar amount of all of the state's largest current contracts. The providers for the department's eight consulting contracts worth over a million dollars are all located outside of Louisiana.

Board of Elementary and Secondary Education members review contracts below $50,000 and must approve or reject those over $50,000.

Former BESE members Dale Bayard and Linda Johnson both wonder why the state doesn't use more Louisiana providers.

"We don't want our children to leave the state to work for someone else, and it's the same thing with our money," Bayard said.

"When you have a fairly large department and you do as many contracts with so much of the work contracted out, it causes you to wonder, 'Can't we do some of that ourselves?' " Johnson said.

White said the Department of Education contracts with several of the state's universities to provide professional services to teachers and administrators.

Current BESE member Lottie Beebe, who has served on the board since January, is overwhelmed by the volume of contracts BESE must approve.

While many of those contracts leave Beebe "in the dark", she's currently reviewing state contracts for the Recovery School District. Thirty-four of the contracts in the RSD are for more than $1 million each.

The RSD's largest contract is with Jacobs Project Management/ CSRS Consortium, a partnership between a Louisiana-based company and a Texas company overseeing renovation and construction of schools in the New Orleans area for $36 million.

Beebe said when she questions issues that come before the board, other board members often tell her, "We need this."

"I feel things happen so quickly during the meetings," she said. "A motion is made, it's seconded and before you know it, it's approved. How can you assure accountability to the public when things are moving so quickly? I don't see a need for BESE. I see it as a rubber-stamp board. They have the votes before the meeting begins."